Case Number: ITA 1208/DEL/2021
Appellant: Sledgehammer Oil Tools Private Limited, New Delhi
Respondent: DCIT, CPC, Delhi
Assessment Year: 2019-20
Case Filed on: 2021-09-23
Order Type: Final Tribunal Order
Date of Order: 2022-02-28
Pronounced on: 2022-02-28
In the Income Tax Appellate Tribunal, Delhi ‘G’ Bench, New Delhi, the case of Sledgehammer Oil Tools Private Limited (the appellant) versus the DCIT, CPC, Delhi (the respondent) involved an appeal regarding the disallowance of ESIC and PF contributions for the assessment year 2019-20.
This appeal was directed against the order passed by the learned CIT(A), National Faceless Appeal Centre, New Delhi dated 30.07.2021.
The primary issue in this appeal was the disallowance of Rs. 13,46,650/- under Section 36(1)(va) of the Income Tax Act, 1961, on account of the delayed deposit of employees’ contributions to ESIC and PF. The Central Processing Centre (CPC), Delhi, via intimation dated 18.11.2019 under Section 143(1) of the Income Tax Act for the assessment year 2019-20, made adjustments by disallowing the expenditure due to the late deposit.
This disallowance was confirmed by the CIT(A) on the premise that the contributions were not deposited by the due dates specified in the respective acts. Aggrieved by this decision, the appellant, Sledgehammer Oil Tools Private Limited, filed an appeal before the tribunal.
The appellant’s representative argued that since the employees’ contributions to ESIC and PF were paid before the due date of filing the return under Section 139(1) of the Income Tax Act, the disallowance was unwarranted. They relied on various judicial decisions supporting this view.
On the other hand, the department’s representative contended that the disallowance was justified because the contributions were not deposited by the due dates specified in the respective acts.
After considering the rival arguments and perusing the record, the tribunal noted that it was undisputed that the contributions were deposited before the due date of filing the return, though after the due dates specified in the respective acts.
The tribunal referred to several judicial decisions that have consistently held that if employees’ contributions to ESIC and PF are deposited before the due date of filing the return, no disallowance under Section 36(1)(va) can be made. They also noted that the amendment to Sections 43B and 36(1)(va) by the Finance Act, 2021, is prospective and applies only from 01.04.2021.
In the final judgment pronounced on February 28, 2022, the Income Tax Appellate Tribunal, Delhi ‘G’ Bench, ruled in favor of the appellant, Sledgehammer Oil Tools Private Limited. The tribunal directed the Assessing Officer to delete the disallowance of Rs. 13,46,650/-.
This case reaffirms that contributions to ESIC and PF deposited before the due date of filing the return are allowable deductions and that the amendments brought by the Finance Act, 2021, are prospective.
Tribunal Members:
Sh. Saktijit Dey, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
Date of Pronouncement: February 28, 2022
The tribunal’s order was pronounced in the open court, bringing closure to the appeal in favor of Sledgehammer Oil Tools Private Limited.
Disallowance of ESIC and PF Contributions for 2019-20: Sledgehammer Oil Tools vs DCIT
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform